The Problem of the State Owned Enterprise as the Owner of Press Organs in European Liberal Democracy: The Norway Pension Fund Global Places Polski Koncern Naftowy Orlen SA Under Observation

 

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On 22 February 2023, Norges Bank announced its decision to place the company Polski Koncern Naftowy Orlen SA, a Polish state owned enterprise,  be under observation. The basis for this determination was uneasiness about indirect Polish state ownership of a majority of press organs in Poland, through the acquisition, by Orlen, of Polska Press. The uneasiness was due to what was an unacceptable risk that the company is contributing to human rights violations in the form of indirect state interference with civil and political rights, as well as cultivating a relationship that might undermine the democratic character of the state. These worries were elaborated in the Ethics Council’s recommendation here, in which they concluded:

The Council notes that several actors have expressed grave concerns about the political independence of Polska Press’s publications in the runup to the 2023 elections. Critics fear the publications will be used as mouthpieces for those currently in power. The extent to which this risk may materialise is nevertheless uncertain. Due to the uncertainty attaching to developments forward in time, the Council recommends that the company be placed under observation. (Council Recommendation, p. 13).

The effects were augmented because the acquisition in this case capped something like a mini buying spree of press organs by Orlen in Poland.

In 2019, before acquiring Polska Press, Orlen purchased 66 per cent of the shares in Sigma BIS, another media and advertising company. In 2020, Orlen also acquired Ruch group, a nationwide news outlet that also has distribution in the wholesale and retail sectors. Ruch’s network comprises around 2,400 newsagents (kiosks), making it the largest newspaper distributor in Poland. (Council Recommendation, p. 5).

The conclusion was buttressed by a number of factors: (1) substantial turnover of personnel; (2) criticisms by university  groups ; (3) concerns expressed by Polish and European journalists and civil society organisations; (4) the issues raised during the course of a failed effort by the Polish Commissioner for Human Rights to have the competition authorities reconsider the approval of the acquisition because "the authorities did not assess whether the acquisition would pose a potential threat to the media’s independence and diversity" (Council Recommendation, p. 7); (5) "numerous allegations have been made concerning the exercise of political influence over the editorial content of Polska Press’s newspapers." (Ibid., p. 9). 

In its defense, Orlen sought refuge in the traditional safe harbor for state activity in private markets--that it was engaged in such activity for purely and traditional commercial reasons--that is to make money.  

Orlen has further explained that the acquisition was a purely commercial transaction that fits well with the company’s strategic plans to strengthen retail sales and is in line with global trends. The company also sees the acquisition in connection with its purchase of Sigma Bis and Ruch. Furthermore, the company describes plans to develop big data tools to as it can now collect information on 60 per cent of internet users in Poland. This will enable it to create new business models and provide better geographical coverage and personalised offerings to selected customers. (Council Recommendation, p. 11).

Interestingly, though the Ethics Council was quick to dismiss this line of defense, the did so without any consideration of the OECD Guidelines on Corporate Governance of State-Owned Enterprises (2015). Useful in that respect might have been Principle III.A. ("There should be a clear separation between the state’s ownership function and other state functions that may influence the conditions for state-owned enterprises, particularly with regard to market regulation."). More importantly, it is not clear that the acquisition might have been consistent with the general requirements of Principle I, the official Annotation to which note:

The state exercises the ownership of SOEs in the interest of the general public. It should carefully evaluate and disclose the objectives that justify state ownership and subject these to a recurrent review. The members of the public whose government exercises the ownership rights are the ultimate owners of SOEs. This implies that those who exercise ownership rights over SOEs owe duties toward the public that are not unlike the fiduciary duties of a board toward the shareholders, and should act as trustees of the public interest. High standards of transparency and accountability are needed to allow the public to assure itself that the state exercises its powers in accordance with the public’s best interest.
In OECD countries, the rationales for establishing or maintaining state enterprise ownership typically include one or more of the following: (1) the delivery of public goods or services where state ownership is deemed more efficient or reliable than contracting out to private operators; (2) the operation of natural monopolies where market regulation is deemed infeasible or inefficient; and (3) support for broader economic and strategic goals in the national interest, such as maintaining certain sectors under national ownership, or shoring up failing companies of systemic importance. (OECD-SOE, supra, p. 29)

A missed opportunity. Instead the Ethics Council appeared to express a preference for a sui generis rule applicable to the ownership of speech management or producing organs when thy are owned or controlled by the state.

In light of the volume of publications that have been affected by the acquisition, combined with the crucial importance of press freedom for a number of other rights, the Council has, in this case, assessed whether the company can be said to contribute to systematic norm violations. As in previous recommendations, the Council has attached importance to the fact that these are not merely isolated incidents but that the norm violations may constitute a pattern of behaviour. The Council has also accorded weight to the fact that the company seems to deliberately be operating at the limits of accepted norms (Council Recommendation, p. 12).

It might have easier if the Ethics Council had adopted a rule of mandatory separation. Given the thrust of the subtext of their decision, it appears that the Ethics Council was lurching toward but was unable to muster the courage to declare a bright line rule of the incompatibility of liberal democracy with state ownership of press organs.  The result would have been to limit that state to transparent propaganda and information services, but to forbid it form controlling press or news organs which would remain as an institutional vessel for the elaboration of civil and political rights.  

That leaves only the matter of observation. In this case it is not clear what observation means; nor is it clear how observation is tied to the role of the Pension Fund Global as a governmental shareholder of a state owned enterprise, the interference of which touches on the legitimacy of the sovereign constitution of another state. That is a difficulty here.  Ordinarily such matters would be taken up at the EU level or as a matter of inter-governmental dialogue. Yet because both the Norwegian Kingdom and the Polish Republic are operating through entities in private markets, the traditional performance of inter-state relations within international normative constraints must be manifested some other way.  What that way is in this case remains murky.  Another missed opportunity.